Shifting away from Carbon-based Fuel
America’s power generation and transmission providers face a tough balancing act as they shift away from carbon-based fuel while continuing to deliver sufficient electricity at affordable prices to their customers. Dairyland Power Cooperative is meeting the challenge while also preparing for an anticipated surge in demand as its member cooperatives grow.
Dairyland provides wholesale electricity to 24 distribution cooperatives and 27 municipal utilities across Wisconsin, Minnesota, Iowa and a small part of northwestern Illinois, which in turn serve more than half a million residents and businesses. Founded in 1941, the cooperative relies primarily on coal with a growing portfolio of natural gas, hydro, wind, solar and biogas.
“We’re seeing increasing interest from our members and their customers to move away from carbon fuel, so we’re responding as we also continue to deliver safe, reliable and cost-competitive power,” said Dairyland CFO and EVP Phil Moilien. In response to member interest, Dairyland’s board has adopted a 50% carbon reduction goal by 2030.
Last year, it retired one of its baseload coal plants, despite not facing carbon taxes or renewable energy requirements across the vast majority of its territory. Replacing the lost generation capacity will be an ongoing but necessary effort, especially as the cooperative is expecting a 20% jump in demand in 2025, when a large load will come onto its system as a result of four member distribution cooperatives acquiring a large Minnesota service territory. This effort has already been bolstered with the 2021 purchase of the RockGen Energy Center, a 503-megawatt natural gas facility in Wisconsin, financed by CoBank and two Farm Credit partners.
“We’re looking at a significant increase in demand, but fortunately we have time to prepare and get resources in place,” Moilien said. “We usually rely on the unbeatable interest rates through RUS for our generation facility purchases, but this owner was very motivated to sell so we needed to move quickly.”
CoBank has been a long-time financial partner to Dairyland, previously delivering term loans, lines of credit and leasing to fund a variety of projects, from rail cars to fleet vehicles to a pension plan prepayment. The RockGen financing was two-part: an initial interim loan to meet the immediate need, replaced with a $205 million long-term loan.
“We’ve always valued CoBank’s ethics and straightforward communication, and have developed a mutual respect and trust,” said Moilien. “In this case, when time was of the essence, they moved quickly to get the deal done so we’re in a better position to meet our members’ expectations.”
RockGen is only the most recent step in Dairyland’s carbon transition—another Wisconsin natural gas project is planned for 2027, and the cooperative is examining carbon-free nuclear energy technologies, as well.